Gold Prices Set To Fall Again On Tuesday

Gold prices in select Indian cities for 22 karats

Reasons for the fall in gold prices

In India, gold has been on a decline ever since international prices plunged, following a good jobs data from the US. The worries now are the US Fed would reduce its bond purchase programme and reduction in liquidity could have an impact on gold prices.

"Gold prices have been on a downward trend. It has lost around Rs 2,000 in value in the last two weeks. The latest US jobs data released was better than expected. It led to a boost in US Dollar and Treasury yields. A stronger dollar makes gold expensive. The better than expected jobs data also fueled the belief that US Fed may start tightening the monetary policy earlier than expected. High interest rates reduce the appeal for investment in gold. Also, an expectation of a quicker recovery in the US and global economy will reduce uncertainties and thereby investor's appetite for gold.

Rising inflation in some countries may force their respective central bank to tighten monetary policy, raise rates. Going forward, the way countries control the spread of new variants of the virus, recovery in the global economy, the pace at which global central banks unwind their easy monetary policy regime will guide gold prices." says Nish Bhatt, Founder & CEO, Millwood Kane International - an Investment consulting firm.

Gold prices could consolidate at these levels

According to Navneet Damani, VP - Commodities Research, Motilal Oswal Financial Services, Gold extended its fall, along with silver after a stronger than expected U.S. jobs reported on Friday which fueled the bets that the Fed may start paring back its massive monetary stimulus soon.

"The dollar and benchmark 10-year Treasury yields jumped after the data, denting non-yielding gold's appeal. U.S. employers hired the most workers in nearly a year in July and continued to raise wages, giving the economy a powerful boost. Market participants worry that the U.S. economic recovery and rising inflation might spur the Fed to pull back on unprecedented economic support. No major data is expected on the economic calendar today, although U.S. inflation data is scheduled later this week which will be important to watch. Also, RBI's fifth tranche of the Sovereign Gold Bond (SGB) is starting from today for five days.

Issue price for this SGB Scheme 2021-22 is fixed at Rs 4,790 per unit, and a discount of Rs 50 per gram, less than the nominal value has been decided for the investors applying online. It is advised to invest in SGB or any other platform available like ETF or Digital gold based on one's risk appetite. Broader range on COMEX could be between $1720- 1775 and on the domestic front prices could hover in the range of Rs 45,800- 46,335," Damani added.